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// 5 Steps for Successful Schedule

Risk Analysis on CAPEX Projects

Tom Polen
Director, Professional Services
// Agenda

Introductions
The 5 steps
1. Capturing uncertainty: calibrating the schedule
2. Identifying risk events: accounting for unknowns...
3. Alternate scenarios: risk adjusted schedules
4. Interpreting results: exposure & drivers
5. Risk Reduction: reducing risk exposure
Worked examples
Q&A
March 20, 2013 // 2
// Acumen Realistic Scheduling

Proven Project Analytics // S1 The Base

// S2 Critiqued

Project Management Software


// S3 Risk-Adjusted
Focus on analytics
Core Concepts // S4 Optimized
Project success requires a sound plan
Forecasting requires risk consideration // S5 Team-Aligned
Recognition
2012 Planning Innovation of the Year
Product Offerings
2012 Inc.500 Award
Legacy Acumen Platform
20 years of project management software
Open Plan, Pertmaster, Fuse Risk Workshops
Conduct 50 risk workshops a year
Software Training

March 20, 2013 // 3


// Project Risk Analysis
Introduction

Scheduling
Science behind forecasting project completion
Doesnt account for scope uncertainty, unknowns
Project Risk Registers
Becoming more prevalent
Still isolated from true risk analysis
Risk Analysis
Gain true insight into schedule achievability
Pinpoints risk hotspots that will cause delay
Structured approach to reducing risk exposure

March 20, 2013 // 4


// Why Bother with Risk Analysis?
Insight from Risk Analysis

Reveals hidden
critical paths
High Risk
Brings realism to
your forecast
Non-Critical Path poses
Managed
greatest risk to project contingency
completion
Generates team
Project Completion
Critical Path doesnt
buy-in to the
impact project completion schedule
Helps with the
likes of IPA
Low Risk certification

March 20, 2013 // 5


// How Does Risk Analysis Work?

Based on CPM
(scheduling!)
Accounts for variability in
the forecast
Schedule uncertainty
Risk events
Cost-impact of time
Monte Carlo simulation
Essentially a brute force
approach
Highly prone to schedule
logic & inputs

March 20, 2013 // 6


// Model Basis
Sound Schedule

March 20, 2013 // 7


// Building a Risk Model
Alternate Approaches

Risk Load Critical Path Create a Summary Schedule


Pros Pros
Focuses the team in a Excellent means by which
workshop to facilitate a workshop
Based on actual schedule
Easy to risk load/build risk
Cons model
Assumes known critical Cons
path
Risk events make this Lose the logic
approach flawed integrity/calendars/detail
Dangerous approach to of a schedule
risk modeling Separate model to
Doesnt give true picture maintain to that of
of risk schedule

March 20, 2013 // 8


// A More Effective Approach
Uncertainty Factor

Top-Down Categorization Graphical Approach


Retains true integrity of
the project schedule
Ensures whole
schedule is categorized
Very fast approach
Removes complexity
Eliminates crazy
rankings

March 20, 2013 // 9


// Step 1: Capturing Uncertainty

Background Uncertainty Factor


Uncertainty
variability regarding
durations/costs
Is the duration realistic?
Scope definition
Complexity of work
Past performance
Just plain wrong!
Not dates!
Dates are the results of
durations & logic
Old school approach
Min, most likely, max &
distribution type

March 20, 2013 // 10


demo
// Step 2: Capturing Risk Events

Risk Events Project Risk Register


Discrete event
2 key attributes
Probability
Impact(s)

Threats & opportunities


Multiple states
Current
Mitigated
March 20, 2013 // 11
// Risk Register Calibration

One Size Doesnt Fit All Risk Register Calibration


# of categories
5X5 is standard
Define probability scale
Dont adopt HSE scale
Calibrate impacts
Relative or absolute?
Determine thresholds
Risk score is irrelevant

March 20, 2013 // 12


// Mapping Risk Events
Tying it all Together

Risk Register Schedule


Risk Description Probability Impact
ID Transportatio
n
5d H: 10 d
0001 Hurricane 25% 10 days

Construction
0002 Labor Strike 50% 50%
30 days LS: 15 d

Commissioning

20 days LS: 10 d H: 10 d

March 20, 2013 // 13


demo
// Step 3: Risk Adjusted Schedules
Running the Simulation

Accounts for all


reasonable
combinations of risk &
uncertainty
Is true to the logic of
the CPM schedule
Critical path may jump
Run enough iterations
until results dont
significantly vary

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// Step 4: Risk Exposure
Histogram
P- Dates

P-Dates
Im 50% confident I will
finish on
Contingency Contingency
How much more/less
time do I need to finish
by?
Confidence Level Confidence
What chance do I have of
hitting my finish date?
Risk Range Factor
Much better means of
determining risk exposure

March 20, 2013 // 15


// Step 4: Risk Drivers
Tornados

Risk Drivers Total Contribution


High-risk activities
Most impactful events
Traditional Reporting
% based
.
Uncertainty/Logic/ Risk
Event Contribution

Risk Contribution Factor


True measure of impact in
duration & cost!
Differentiates between
uncertainty & risks

March 20, 2013 // 16


demo
// Step 5: Risk Reduction
Scenario Comparison

Compare scenarios in
a single workbook:
Turn on or off risks Benefit of Mitigation
Benefit of mitigation
Uncertainty vs. Risk Events
Schedule A vs. Schedule B
Impact of schedule delay
on cost risk

March 20, 2013 // 17


demo
// Schedule Impact on Cost Risk
Cost Risk Distribution Schedule Risk Distribution

P100 360d (120%)

Deterministic: 300d

$90K $100K $130K P0 280d (93%)

Uncertainty
Schedule Impact on Cost Risk Distribution

$84K $90K $100K $130K $156K

Uncertainty
Developing Cost Risk
//
Models
Accounting for Schedule-Risk

March 20, 2013 // 19


demo
More information:
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Email: info@projectacumen.com